Accounting 9706 · AS & A Level · Standard costing

Standard costing — practice question

EF plc produces only one product, and it holds no inventories of materials or finished goods.
(a)[2]

State two reasons why a business prepares a flexed budget.

(b)[6]

Prepare a statement to show the budgeted profit for the month of March.

(c(i))[2]

Calculate the direct labour rate variance for March.

(c(ii))[2]

Calculate the direct labour efficiency variance for March.

(c(iii))[1]

Calculate the total direct labour variance for March.

(d(i))[2]

Calculate the number of hours actually worked in April.

(d(ii))[5]

Calculate the number of units actually made and sold in April.

(e)[2]

Suggest two possible reasons why the efficiency variance was adverse in April.

(f)[3]

Discuss the disadvantages to EF plc if they go ahead with this plan.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: Actual production level differs from budget

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